LANDO

I believe that since you've restated onto a pre-approved document you have to meet one of the exceptions in Rev Proc 2019-4 in order to file a pre-approved document for a determination letter. https://www.irs.gov/pub/irs-irbs/irb19-01.pdf

Try this... https://www.irs.gov/pub/irs-drop/rp-19-20.pdf?utm_source=ERISA+Law+Alert+-+5%2F2%2F19&utm_campaign=2%2F21%2F17+Newsletter&utm_medium=email See the excerpt below from: https://www.wagnerlawgroup.com/resources/erisa/irs-expands-determination-letter-program-revenue-procedure-2019-20 "...Sponsors of individually-designed statutory hybrid plans, such as cash balance plans and pension equity plans, may submit requests for determination letters during the 12-month period beginning September 1, 2019 and ending August 31, 2020. Because the IRS's scope of review during a statutory hybrid plan's most recent remedial amendment cycle did not include provisions related to the final hybrid plan regulations, sponsors of statutory hybrid plans now have the opportunity to request that the IRS review their plans during this one year submission window to verify their plans comply with the hybrid plan rules and to correct plan document failures related to these rules without having to pay a sanction."

Gotcha Luke. I took the original post to mean they only had one hardship and they didn't suspend deferrals. If this is the only hardship taken in their plan year beginning in 2019, and they don't suspend for anyone going forward, they should be okay waiting for interim amendments to become available. At least pending further guidance from IRS.

Luke, are you saying that a plan must adopt a plan amendment by the end of the year? Aren't we waiting on the IRS to tell us what the amendment deadline for early adopters of the final hardship regulations are...at least with respect to IRS Pre-approved documents? I don't think it would hurt to amend a plan to eliminate the six month suspension early, but preferably those of us that use mass submitter documents would prefer to wait till our vendors come up with interim amendments.

Good point on the anonymous VCP part Luke. Thank you.

I have a similar situation and am fairly convinced that IRS would not bless a retro amendment. In my case, sponsor didn't match on catchup contributions, and hasn't since the plan added catchups in 2002. Document, SPD and the enrollment materials all clearly say catchup contributions are matched. This sponsor is very unusual in that they have always used a catchup election form, which participants sign indicating how much they want to contribute as catchup. No need to comment on the appropriateness of the form. We know catchups are "created" by exceeding a limit, they are not typically designated by a participant. In any case, the catchup election form has a clear statement that catchup contributions will not be matched. The sponsor apparently has such a form for every catchup eligible participant. My thinking was that it is unlikely the IRS would allow this sponsor to eliminated a vested accrued benefit given the conflicting messages to participants, but given the comments above, I'm thinking it may be worth trying anonymous VCP? Additional question: Since this is a VCP anyway (significant failure and goes back more than two years) can an anonymous VCP requesting retro amendment be turned into a regular VCP where the sponsor contributes the match (with interest) if the IRS won't bless the retro amendment? In other words, can you start with an anonymous VCP requesting permission to retroactively amend, and then if you don't get the result you want, change gears with the same VCP and request a compliance statement blessing a missed match contribution with interest? Maybe this would be just as much work as just starting over with a regular VCP, but at least you'd avoid a second $3500 filing fee (this is a large plan).

Why not just self-correct under Rev Proc 2019-19, Section 6.06(4)?

English professor...that's a good one! Thanks for the support, and "No" the Wife is not a director, and purportedly not involved in the management of the Husband's business. I have subsequently found the following resource (link below, see page 17 of 94) which is apparently a training outline the IRS put together for Enrolled Agents. That does support that each element, per ETA's comment above, must be satisfied. I haven't found anything else particularly useful, but I will be referring them to their own ERISA counsel if they insist on their interpretation. https://www.irs.gov/pub/irs-tege/2013cpe_related_employers.pdf

I have a situation where Husband owns 100% of one business and Wife owns 100% of an unrelated business. Husband's business maintains a 401(k) plan for it's employees. Wife is an employee of Husband's business. They have a pre-nuptial agreement regarding the ownership of their own businesses, so there are no "direct" ownership issues. We have told them the two businesses are related because they do not qualify for the exception under IRC 1563(e) because the Wife is an employee of Husband's company. She is also a participant in the 401(k) plan her Husband's company maintains...probably the reason she's an employee in the first plan, but that is besides the point. They have come back an said the conditions under 1563(e)(5)(B) are satisfied even though the Wife IS and employee of Husband's business since she "does not participate in the management" of the Husband's business. Their interpretation is that the "and" underlined below means both conditions must be satisfied (employee and participate in management) for the condition to be considered not met. 1563(e)(5)(B) The individual is not a director or employee and does not participate in the management of such corporation at any time during such taxable year; I do not see anything in the Code or Regulations that clarifies this point. I have always interpreted this section to mean that if a spouse is an employee or director, the spousal attribution exception does not apply. I would read the part about not participating in the management as a separate condition. None of the articles I can find on the subject address the "management" language in 1563(e)(5)(B). Seems contrary to the general intent of the rules around spousal attribution to say the spouse can be an employee and participate in the plan, but the spousal attribution rules can be ignored as long as the sponsor is willing to say the spouse doesn't participate in the management of the sponsor. Anyone have thoughts on this? Authority for either position?

Even a church plan has to follow the terms of it's plan document, else why even require one! I think you essentially have vested accrued benefits to deal with and are stuck with QNECs, and potentially required ER contributions. Retroactively taking away an accrued benefit by amendment seems risky at best and I would definitely seek legal counsel before going that route.

I think the FIS/Relius approach is to follow the DOL disability claims procedure if a claim is denied. Given what I perceive to be the rarity of disability claims denials, that approach makes more sense than trying to amend each plan individually to make a third party responsible for disability determinations, or a blanket approach using a social security determination for all plans. One of the problems with requiring the participant to qualify for disability under social security is that those determinations can take a long time, and sponsors may want to give participants access to disability benefits long before that determination is made. I haven't completely resolve what we are going to do with our clients, but I'm leaning heavily towards the FIS approach.

Our document (Word for Word Adopter ASCi VS) is pretty darn specific, and defines the Safe Harbor as the amount necessary "to pay expenses to repair damage to the Participant's principal residence that would qualify for a casualty loss deduction under Code Sect 165..." It would pretty hard to make the argument that a hardship request after the effective date of TCJA that didn't qualify under 165 as amended still meets the requirements under our document.

Assuming the plan document does not preclude the following, can "Excess Allocations" placed into an "unallocated account" pursuant to EPCRS, Rev Proc 2016-51, Section 6.06(2)be used to fund corrective QNECs required under EPCRS, Rev Proc 2016-51, Section Appendix A.05(2)(b, for a missed deferral opportunity? Situation: Sponsor failed to withhold deferrals for an eligible participant, but contributed $7000 to his deferral account anyway. Since the amounts were not deferrals, the amounts are being removed from his deferral account and placed in an unallocated account. This participant now has missed deferrals and is owed a QNEC. Can the amounts removed from his account and placed in an unallocated account be used to fund his corrective QNEC? Please assume there is nothing in the plan document that would preclude such a practice. Thanks in advance for your thoughts.

Could they merge the plans a year down the road and end up with the result they wanted and a single plan?

These are exactly the situations the ASG rules were meant to address! So here's the deal Doc...we'll set up a company to employ all your staff, then you just pay us for their services. That way you won't have to worry about covering them under your benefit programs. Pretty sweet right? If it doesn't smell right, keep digging.

What about the plan sponsor filing an "interpleader" action with the federal court, which would have jurisdiction over ERISA matters. I don't know that you'd get the desired result, but that would get the sponsor/plan administrator out of the middle of any disputes. Otherwise, I'd agree that you have to follow the terms of the plan document.

Actually, I've had this come up more than once recently in asset purchase situations. Sponsor purchases the assets of another company that has a plan, hires the EEs of the seller, and then accepts rollovers from the seller's plan, which may or may not be terminating. Where the EEs of the seller have loan balances in their prior employer's plan it's pretty hard to tell them they either have to pay back the loans before they roll their balance over or the loan will be defaulted. The solution, which we administrative types don't love, is to allow for rollovers of loan balances. It is what it is. Sometimes you just have to accommodate what makes sense.

I don't agree with the prior answer either. The PS-58 cost represents a distribution from the plan for the annual cost attributable to the pure life insurance portion of the policy. That amount is used up each year, is an annual distribution from the plan, and I don't think it has anything to do with the basis in the policy. I would think the correct answer is to issue 1099s for the applicable tax years and then the participant would need to file amended tax returns for the applicable years. However, I don't like that answer! Hopefully, someone can suggest something less painful, particularly for the participant involved. Any thoughts on the subject would be appreciated.

It's participant directed, and I get your point Peter. Thanks.

Yea, those are good points Lou. Thanks for sharing your thoughts.

One of our clients is a large multi-employer profit sharing plan. Participants come and go all the time in this plan, but many times simply drop off the radar screen indefinitely. My questions are, Does the plan have to continue to attempt to deliver statements every quarter even though statements have come back as undeliverable for many many quarters? Is there some obligation to use a locator service to try and get a valid mailing address? This would be with respect to participants that are not subject to force out distributions.

Seems like election a.ii. would only capture those that were deferring less than initial automatic enrollment amount...like the base amount. I guess I'd clarify that anyone deferring less than the highest escalation percentage is going to be auto-enrolled. Just a suggestion. In any case sounds like a fair amount of work. Document amendment, updating enrollment forms, re-enrollment, updating payroll records, etc. Then what happens if someone who was deferring in excess of the max escalation amount, and therefore wasn't subject to the ACA, changes their deferral percentage to be zero, or something in between? Seems like perhaps you should apply the ACA to everyone so they have to fill out the new form agreeing to be auto-escalated annually even if they aren't subject to the ACA.

That makes sense to me. Auto enroll everyone and force them to fill out a new deferral election form if they don't want to be defaulted, and then the new form would include the special language about auto escalation even for participants who made an affirmative election of less than the max escalation %. I wonder if you could only auto enroll those who have made an affirmative deferral election of less than X%?

Our document vendor said this is more of a deferral election feature and suggested the enrollment form should make clear that participants electing to defer less than the max escalation amount (in this case 8%), would be auto-escalated each year by 1%. That way when the participant signs their deferral election form they are agreeing to this feature. The participant can always affirmatively elect to keep their deferral election the same, or change the percentage, and the plan would need to accommodate that. I don't disagree with this approach, but it's a little cumbersome to modify the forms, and even more cumbersome for online enrollment/deferral change accounts. We have a couple of plans that use a similar feature, and I simply drafted language into the ACA section of our VS document outlining the feature, and then included a description of the feature in the SPD. To my knowledge none of the plans we've used this feature on have been the subject of a DOL or IRS examination, but I'm thinking the provision should hold up. Also, given that the IRS is not inclined to issue determination letters on amendments, I don't know that there's much more we can do here. Good luck.

I've been researching Money Market Reform issues, and my initial research was centered around trying to figure out if Health & Welfare plans are eligible for "Retail Money Market Funds (MMFs)", but as I read through multiple articles I have become more confused. Questions: Are trustee directed defined contribution plans eligible to invest in Retail MMFs?Most of the articles refer only to defined contribution plans, but at least one article said only "participant directed defined contribution plans" are eligible to invest in Retail MMFs Are Health & Welfare plans (pooled funding/non-participant directed plans) eligible to invest in Retail MMFs?What about Health & Welfare plans where participants do get to choose how their accounts are invested (eg. HSA plans)? Based on what I've read so far, the ability to invest in Retail MMFs is limited to "Natural Persons", which includes omnibus accounts where the "beneficial owners" are natural persons. It seems to me in reading SEC Release No. 33-9616, Beneficial Ownership means having voting and or investment powers, which would not be the case in trustee directed plans, which would be consistent with not allowing DB plans to invest in Retail MMFs. Any guidance would be appreciated.